S&P’s Economic Activity for Asia Pacific report indicates that CPI inflation has increased due to elevated energy prices, though it remains broadly contained. A modest upward influence on inflation is anticipated from higher oil prices. Food prices may also see an increase stemming from El Niño conditions; however, proactive mitigation strategies are expected to avert severe supply disruptions and curtail broader macroeconomic consequences. Depreciation pressures on Asia-Pacific currencies have receded throughout the third quarter, following substantial declines during the first half of 2026, according to S&P. The majority of Asia-Pacific currencies remain devalued relative to the U.S. dollar compared to the beginning of the year.

S&P anticipates that certain central banks will implement additional policy rate increases this year to manage inflation and bolster exchange rates. Within its baseline scenario, assuming inflation and exchange rate pressures remain moderate, it projects the tightening to be limited. S&P forecasts a 25 bps increase in the remainder of 2026 in select countries including India. Regarding India, S&P anticipates a move toward higher interest rates, supported by robust growth, sustained inflationary pressures, an ongoing conflict in West Asia, and weather-related vulnerabilities. They project consumer inflation to average 5.1% and the Reserve Bank of India to raise its policy rate by 25 bps in the current fiscal year.